The defining feature of an oligopoly is that each firm's decisions are strongly affected by:
Correct answer: B. The strategic decisions of rival firms
- A. The weather in unrelated markets
- B. The strategic decisions of rival firms
- C. The fixed costs of households
- D. The total population of the country
Explanation
An oligopoly has a small number of significant firms, so each firm must consider how rivals may respond to its price, output or advertising decisions. This mutual dependence distinguishes it from perfect competition.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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